to hide the fact that those in control are plundering the corporation, equity will brush aside the puppet directors and charge the fraud, and its consequences, upon the true source. Fraud is none the less fraud when perpetrated through accomplices®.

A corporation can be bound by corporate action only, and where such action is absent, purported corporate contracts are, unless ratified, void for want of mutuality?. Individual

directors have no implied powers by virtue of that offices. Nor would ownership of a majority or of all of the shares10 of the corporation confer upon an individual director implied power to bind the corporation.

Where, as is usual, the charter or by laws require the directors to act as a board, their separate concurrence, unless supported by a subsequent ratification, is insufficient to make their act binding upon the corporation". But when an unauthorized

5. Chicago & Grand Trunk Ry. Co. v. Miller, 91 Mich. 166-183.

6. Lucas v. Friant, 111 Mich. 426-435; Jones v. Green, 129 Mich. 203-207; Hanley v. Balch, 94 Mich. 315; Miner v. Belle Isle Ice Co., 93 Mich. 97-110; Ruttle v. What Cheer Coal Mining Co., 153 Mich. 300. In this case Foss was the president, treasurer and general manager of a corporation, for which he had furnished all the capital, and of which he owne all of the stock, except two shares given to "dummy" directors. He assumed entire control of the company, and, without authority, employed Ruttle, who rendered services. Under these circumstances it was held that the act of Foss was the act of the corporation, and that the corporation could not escape liability by disclaiming the contract employment as unauthorized.

7. Finley Shoe & Leather Co. v. Kurtz, 34 Mich. 88-91. Action of the board can not be inferred from anything short of concurrert doings. Bond v. Pontiac, Oxfor1 & P. A. R. Co., 62 Mich. 643-649.

8. In Finley Shoe & Leather Co. v. Kurtz (ante), Chief Justice Cooley said: "Where joint action is required by law, individual ac

tion is of no avail, and it at most only puts the individuals under honorary obligations, of which the law can take no notice." Thus, in this case it was held that, where a corporation was indebted, and its individual directors had agreed to give stock to a creditor, but had none to give, the unoffcial promise of the directors did not bind the corporation to increase its stock. See also Lockwood v. Thunder Bay River Boom Co., 42 Mich. 536-539; Bond v. Pontiac, Oxford & P. A. R. Co., €2 Mich. 651; Taylor v. R. D. Scott & Co., 149 Mich. 525.

9. Chase v. Michigan Telephone Co., 121 Mich. 631-634. 10. Rough v. Breitung, 117 Mich. 48-55.

11. Johnson v. Farmers' Mut. Ins. Co., 110 Mich. 488-490. Upon the principle above stated, forfeitures for non-payment of assessments of mutual insurance companies have been held to be unenforcible in cases where the directors have failed to take the requisite action. Warner v. Life Association, 100 Mich. 157: Miner v. Benefit Association, 63 Mich. 338; Bates v. Benefit Association, 51 Mich. 587; Baker v. Insurance Co., 51 Mich. 243.

act has been ratified it becomes as truly the act of the corporation as though it has been performed pursuant to authority12. Because individual action of the directors is of no avail, it is essential that the board shall declare the corporate intent, and make all necessary delegations of power, by way of duly called meetings. In the absence of notice to all directors, a portion of the board can not assemble and bind the corporation, even by the unanimous action of the directors present13. Proper notice of the meeting, given by implication through some standing rule, or given by actual service, if the meeting be a special one, is essential to enable legal majority action11.

De facto directors enjoy the same powers as though they were directors de jure15. Failure to hold corporate elections works no impairment of the corporate rights and powers16. In the absence of an election at the proper time, the old officers hold over with undiminished official capacity1. Even after the corporate charter has expired by limitation, the last official board continues in the management of the corporate affairs18. In the absence of a corporate officer, for example a secretary, whose official services are a necessary incident of a meeting, an officer pro tem may be appointed, whose acts will be valid19.

The power of general management being vested in the board of directors", they have authority, acting as a board, to bind

12. Anderson Carriage Co. v. Pungs, 127 Mich. 543.

13. Broughton v. Jones, 120 Mich. 462; Covert v. Rogers, 38 Mich. 363; Doyle v. Mizner, 42 Mich. 332; Lockwood v. Thunder Bay River Boom Co., 42 Mich. 536; Peek V. Detroit Novelty Works, 29 Mich. 313; Taylor v. Scott, 149 Mich. 525.

14. Covert v. Rogers, 38 Mich. 363; Doyle v. Mizner, 42 Mich. 332.

15. Jhons v. People, 25 Mich. 500; Swartwout v. Mich. Air Line R. Co., 24 Mich. 389; Walrath v. Campbell, 28 Mich. 111; Druse v. Wheeler, 22 Mich. 439; Cahill v. Kalamazoo Mut. Ins. Co., 2 Doug. (Mich.), 132-136; Scott v. Detroit Young Men's Society, 1 Doug. (Mich.) 119.

16. Cahill v. Kalamazoo Mut. Ins. Co., 2 Doug. (Mich.) 132-139.

17. Kimball V. Goodburn, 32 Mich. 10. In this case Justice Campbell, in sustaining a discharge of mortgage executed in the name of a defunct corporation by its last secretary, said: "It (the discharge) was executed by a person who is shown to have been the last secretary, and who does not appear to have resigned or lost his official character, which mere lapse of time would not destroy. The mortgage having been paid, its release was a matter of right, and we think the secretary was properly authorized to do the formal act and could do it anywhere."

18. Kent County Agricultural Society v. Houseman, 81 Mich. 609-613.

19. First National Bank v. St. Joseph, 46 Mich. 526-528.

20. Genesee Savings Bank v.

the corporation by all lawful contracts for corporate purposes1. They may authorize an officer or agent to settle and compromise claims held by or against the corporation. They have power to make an assignment for the benefit of creditors23. In case of insolvency, they have full power to sell all of the corporate property for the purpose of paying the company's debts. Contrary to the weight of authority in other jurisdictions, the directors of corporations of this State have power to execute mortgages granting preferences to creditors25, and they may do this even though the corporation is insolvent at the time of giving the mortgage26.

Directors who are bona fide creditors of a corporation may, if they act in good faith, and pursuant to proper formalities, secure themselves, in preference to other creditors, by a mortgage on the corporate property27. But where a mortgage taken by directors is unconscionable and fraudulent, the courts will not permit it to stands. The same rule applies to fraudulent mortgages executed to creditors. Where directors have mortgaged the corporate property for the preconceived purpose of having the mortgage foreclosed and the property bid in by a new corporation formed for that purpose and controlled by themselves, or by their "dummies," injured stockholders may fol

Barge Co., 52 Mich. 438; Star Line of Steamers v. Van Vliet, 43 Mich. 364.

21. Eureka Iron & Steel Works v. Bresnahan, 60 Mich. 332.

22. Whitaker v. Grummond, 68 Mich. 249-257.

23. Boynton v. Roe. 114 Mich. 401; Richardson V. Rogers, 45 Mich. 591; Covert v. Rogers, 38 Mich. 363; Town v. Bank of River Raisin, 2 Doug. (Mich.) 530. 24. Knight V. Mich. Female Seminary, 152 Mich. 616-618.

25. Brown V. Grand Rapids Parlor Furniture Co., 58 Fed. Rep. 286, 22 L. R. A. 817.

26. Kock v. Bostwick, 113 Mich. 302: Bank of Montreal v. Lumber Co., 90 Mich. 345; Turnbull V. Lumber Co., 55 Mich. 396; Kendall v. Bishop, 76 Mich. 634; Town v. Bank of River Raisin, 3 Doug. (Mich.) 530.

27. Webster v. Ypsilanti Canning Co., 140 Mich. 489-493; Bank

of Montreal v. Lumber Co., 90 Mich. 345-350; Crossette v. Jordan, 132 Mich. 78-82: Nappanee Canning Co. v. Reid, Murdock & Co., 159 Ind. 614, 59 L. R. A. 199; American Exchange Bank V. Ward, 111 Fed. Rep. 782, 55 L. R. A. 356; Schufeldt v. Smith, 131 Mo. 280; 29 L. R. A. 830; Sandford Fork & Tool Co. v. Howe, Brown & Co., 157 U. S. 312, 39 L. ed. 713. For an interesting Michigan case in which the opinion was written by Judge Taft, see Brown v. Grand Rapids Parlor Furniture Co., 58 Fed. 286, 22 L. R. A. 817. For a case sustaining the right of a majority of the board to pass a resolution authorizing the execution of notes to themselves for matured indebtedness, see Campau v. Detroit Driving Club, 135 Mich. 575-584.

28. Macklem v. Fales, 130 Mich.

66-71.

low the assets into the hands of such new corporation. The fact that the fraudulent transfer has been accomplished by means of valid mortgages foreclosed by judicial decree in due form, lends no validity to the transaction. For the purposes of enforcing restitution, equity will regard the old and the new corporation as identical29.

$59. Officers.

An office in a private corporation is a vested right, of which the holder can not be deprived, except by due process of law3. The right to exercise and enjoy an office in possession is not subject to collateral attack. The question can be raised only by a proceeding where the matter is directly in issue. In equity, all officers of a corporation are regarded as trustees, and as such they may be called upon to account for their administration of the trust32. Where a corporate officer takes advantage of and abuses his power in such a way as to inflict loss, or perpetrate a fraud, upon the corporation, he must respond to the company for the injury, unless his act has been ratified. If corporate officers defraud stockholders for private benefit, the injured parties may elect to proceed against such officers either as individuals, or in their official capacity. The mere fact that the fraud of an officer has become, by adoption, the fraud of the corporation, does not relieve the officer of individual liability. He may not acquit himself by the excuse that he acted officially, because the commission of a fraud is no part of any officer's official duty. The corporation may make itself liable through participation in the fruits of the wrong doing, but this will not relieve the wrongdoer of liability34. Where a corporate officer falsely holds himself out to an innocent third party as having certain authority, and such party relies upon the officer's repre

29. Sparrow V. E. Bement's Sons, 142 Mich. 441-456.

30. People v. Minong Mining Co., 33 Mich. 2.

31. Jhons v. People, 25 Mich. 499; Druse v. Wheeler, 22 Mich. 439.

32. In Bay City Bridge Co. v. Van Etten, 36 Mich. 209-211, Chief Justice Cooley made the following statement: "Officers of a corporation undoubtedly act in a fiduciary capacity, and may be called

to account in equity as trustees. But when they have ceased to be officers, and the only complaint made against them is of an appropriation of funds to their own use, and no discovery is sought, the reasons for seeking the aid of equity which commonly exist in cases of breach of trust are wholly wanting."

33. First National Bank of Sturgis v. Reed, 36 Mich. 262.

34. Hempfling v. Burr, 59 Mich.

294-296.

sentations, the officer binds himself35. Corporate officers who, by abuse of power36, or by want of reasonable diligence37, cause loss to the corporation, are individually liable therefor. Good faith is no excuse for negligence. Honesty of intention will not exonerate a corporate officer for loss arising to the company through his failure to act as a reasonably prudent man might be expected to act under like circumstances38

$60. Powers of Officers.

Unlike the officers of public corporations, those in charge of private corporate enterprises are not bound by rigid rules demanding definite authority as the warrant for every official act. The equitable principles of estoppel and ratification are freely invoked when justice requires, and want of authority is rarely permitted to work a wrong to an innocent third party who has proceeded with reasonable care39. Corporate officers, as well as other corporate agents, are governed by the general rules of agency. Fidelity to trust and adherence to authority are the two great controlling principles of this branch of the law.

§61. President.

The isolated fact that one is president of a corporation con

35. Solomon V. Penoyar, 89 Mich. 11.

36. First National Bank of Sturgis v. Reed, 36 Mich. 262-267; but see Morris v. Imperial Cap Co., 135 Mich. 476-478.

37. Flynn v. Third National Bank, 122 Mich. 642-644.

38. Commercial Bank v. Chatfield, 121 Mich. 641-646. In Alpena Loan, etc., Association V. Denison, 121 Mich. 159, it was held that, where officers charged with the duty of auditing books found such books correct, they were not liable through a failure to discover that the secretary was embezzling money of the company by means of secret books.

39. In the case of Preston National Bank v. Geo. T. Smith Middlings Purifier Co., 84 Mich. 364384, Justice Cahill used the following language: "The strict limitations that govern public corpora

tions and their officers are not to be applied with the same strictness to private business corporations. There are no questions of public interest to be affected by the exercise of corporate power by one agent rather than another in a private corporation. No questions of public policy are involved. The concern is purely private, affecting no one but the owners. What the owners consent to, expressly or permissively, they ought not to be allowed afterwards to deny."

40. Justice Campbell, in Adams Mining Co. v. Senter, 26 Mich. 73-76, said: "There is no reason, and can be no legal principle, which will put the agent of a corporation on any different footing than the agent of an individual, în regard to the same business. A general agent needs no instructions within the range of his du